We have continued to see short term power and gas prices increase over the last few weeks peaking at their highest level since the cold snap in March. This is amid very low wind levels, plant outages, and strong demand for cooling due to the heatwave being experienced in the UK which in turn has increased gas prices further as with less wind on the grid gas plants have produced more than 60% of UK power at times through the month.

Longer term prices have eased with October annual levels lower than where they were at the start of the month as oil prices have eased to a three month low down from $79 per barrel to $72 per barrel as fears of a global economic slowdown if the current US-China trade war escalates. The resumption of Libyan oil production and exports, signs of rising OPEC output and rumours the US is considering withdrawing oil from strategic reserve.

Longer term prices have also been helped by reports of softening Asian LNG prices following a reduction in demand in the region increasing chances of more LNG shipments heading to Europe and the UK which is keeping longer term prices down.

We may well be seeing the highest of the oil prices and if they do ease will help bring prices down and will filter through to short term prices once cooler weather is seen in the UK. The next few weeks will see us out of maintenance season and less outages.

As we are seeing lower longer term prices and with increases in third party charges, it is crucial we have non commodity costs secured and frameworks in place so that we can put in place a robust purchasing strategy and be in a position to secure any commodity prices should it be deemed necessary. If you would like to ensure you have non commodity secured, please contact your account manager and they will be happy to advise.

We are continuing to track the markets both short and long term and should we feel any action is required your account manager will be in touch. If in the meantime you would like to discuss the markets in more detail and obtain an idea of forward costs, please let me know and I will ask your account manager to contact you.